Secured Card Gets You On Road To Credit

It's the Catch-22 of credit cards: To get a card, you need a credit history. To get a credit history, you need a card.

Consumers who find it tough to break out of that circle may want to consider a secured credit card, consumer advocates say.

Many major banks issue secured credit cards, which usually require a deposit of at least $250. The consumer can charge up to the amount of the deposit - or higher, depending on the bank - and can keep the account open as long as minimum balances are paid.

Secured cards usually have high interest rates. But they also offer the chance to build credit or restore bad credit while the consumer stays within his or her means, says Marc Eisenson, a savings expert and editor of The Pocket Change Investor, a quarterly newsletter formerly called The Banker's Secret Bulletin.

"The advantage of a secured card is you can't get in too much trouble," Eisenson said. "It's a good place to begin and a good place to begin anew."

Unlike phony "credit repair" companies, which promise to clean up your credit by challenging information on your credit report, a secured card will help you legally build solid credit.

Consumers who use a secured card for two years and are never late on a payment usually can get a regular credit card in about two years, Eisenson said.

"If you don't make payments on a secured card on time, you can kiss the possibility of a regular card goodbye," he said.

Lois Aronson, director of education at the Consumer Credit Counseling Service of Palm Beach County, said clients who go through their debt management program must destroy all their credit cards. But when they're finished with the program, many start fresh with secured cards, she said.

People who are recovering from a credit nightmare need to walk a careful line between spending within their means but also using their secured card to build a new record.

"Use the card - don't let it sit in a drawer and gather dust," Aronson said.